Exam CSCP topic 1 question 298 discussion

Initial Inventory = 60+25-35=50 After reduced 20%, Inventory= 40 New Cash to Cash= 35+40-25= 50

Is correct ans

Here's the breakdown: Cash-to-Cash Cycle Time Formula: The cash-to-cash cycle time is calculated as: Days Sales Outstanding (DSO) + Days Inventory Outstanding (DIO) - Days Payables Outstanding (DPO). Initial Calculation: DSO = 35 days DPO = 25 days DIO = 60 (DSO + DIO - DPO) = 60 days DIO = 60 - 35 + 25 = 50 days Inventory Reduction: Reducing inventory by 20% means the new DIO will be 80% of the original DIO, which is 50 days * 0.80 = 40 days. New Cash-to-Cash Cycle Time: New Cash-to-Cash Cycle Time = DSO + New DIO - DPO = 35 + 40 - 25 = 50 days.

Imo, it's C Cash to cash calculation formula doesnt include inventory, so even if inventory level changes the cash to cash time remains 60 days

CC = DIO+DSO-DPO 60 = DIO+35-25 DIO = 60-35+25 = 50 Inventory reduced by 20% , new DIO will be 50- 20%of 50 = 40 CC= new DIO+35(DSO)-25(DPO) =40+35-25 =50